During the drought, the Water Fund had become insolvent under the current rate structure, which is why the City enacted the surcharge. The Water Rate Study and the work completed by the Water Rate Advisory Committee (WRAC) looked at the costs to deliver safe drinking water and improve the water system infrastructure as its baseline. The total revenue demand was determined and the current rate, including the surcharge, was used as the starting point for comparison. If the committee had started with the old rate minus the surcharge, the future revenue demand would still be the same, but the adjustment would have started from a lower base rate number. The fact still remains that the revenue necessary to support the Water Fund is represented by the proposed rates and rate structure.
Why is the meter charge increasing more than 9.5%? Why is the variable charge increasing less?
Currently, the City's revenue from water rates is 7% fixed (from meter charges) and 93% variable (from usage charges). Therefore, any time water consumption drops, so does the revenue generated for the Water Fund. Unfortunately, expenses do not drop accordingly, since nearly 80% of the cost to provide water is fixed. Fixed costs to provide water include debt service payments (loans for improvements made to the water system in the past), repayment of loans that were necessary to construct the State Water Project (our main source of water), staff costs, and capital improvements to repair/rehabilitate the water infrastructure. In an attempt to avoid surcharges in the future, the City needs to move to a more stable and reliable revenue structure by collecting more of total rate revenue from fixed meter charges and less from variable. The proposed rates will gradually increase the proportion of revenue from fixed charges to 20% and gradually decrease the proportion of variable revenue to 80%. This still equates to a total 9.5% overall revenue increase per year, which is why it is shown as the proposed annual rate increase.
Why is the sewer charge based on water usage?
Water usage in the winter months tends to be only indoor consumption when there is minimal or even no outdoor water usage. Under that assumption, all of the water coming into a home or business can be assumed to go into the sewer system to be reclaimed at the City's Water Reclamation Facility (WRF). Therefore, the City determines the monthly average water use in the months of January, February, and March. This becomes the expected volume that is returned to the sewer system monthly and is the basis for your sewer rate.
Do we have plans for new sources for water?
Yes. The City has studied long-term supply options to overcome the constraints we face with the State Water Project, our main source of water. The 2016 report Opportunities for Long-Term Water Supply & Operational Improvement (by Kennedy Jenks Consultants) identified the Sites Reservoir Project as a recommended option for American Canyon. The City became a partner in the Project in early 2017. The Project will result in a new water storage reservoir 70 miles northwest of Sacramento near Maxwell, California. This Project is expected to build a reservoir that would provide approximately 2,000 AF of new water supply for the City. Phase 1 of the Sites Project is underway, including environmental review, permitting and preliminary engineering, along with an application for Proposition 1 funding. Anticipated construction will begin in 2022. In addition, the City has a reservation on 2,000 AF of additional water from Sites (Class 2 water) if it becomes available.
Where does our water come from?
The City currently purchases water from the State Water Project (SWP) which supplies approximately 90% of the City's water supply. The other 10% of the City's supply comes from Vallejo or Napa.
How does the City decide which water lines to replace?
The City's water distribution crew uses special sounding technology, which actually listens for leaks. For leaks found on the line between the water main and the meter (service lines) the crew will prioritize the leaks and fix them accordingly. For leaks determined to be on a water main, the replacement is completed as a part of the City's Capital Improvement Program. These replacement projects are completed through a contract bidding process and are constructed by contractors under guidance from the City. The goal is to fund an annual water main replacement program until all of our City mains, that have reached or exceeded their life spans, have been replaced.
In regards to new development, do developers pay for infrastructure costs? Why does the City continue approving new housing, retail, and office developments?
Developers pay capacity fees to support new infrastructure needed for their development. They also pay connection fees, which is the cost to connect or buy in to the existing City water system. Many times, new development must also build infrastructure specific to their site in order to connect to our existing infrastructure.
All new houses and businesses must comply with the City's Zero Water Footprint (ZWF) Policy, which requires new development to offset the amount of water that their new development will use.
How will sewer rates increase?
Sewer rates adjust annually in January by the Consumer Price Index (CPI). Since sewer rates are generating enough revenue to cover operating cost and capital projects, there is no need to perform a rate study at this time.
Will we have a program to help low income households?
The City is looking at different options to assist low income households. The monies collected for water rates cannot be used toward these programs, but non-rate revenue may be used. Examples of non-rate revenue include late fees, interest on water fund monies in the bank, and other fines and turn-on fees. Since a low income program is not part of the water rate Prop 218 process, City Council may enact a program as soon as it is developed.
What happens after 5 years with this rate increase?
After 5 years the rates will only increase by the Consumer Price Index (CPI) in January of each year. If the CPI adjustments are not keeping revenue on pace with the costs of providing water, then another study will need to be completed.
Why doesn't this rate adjustment include recycled water rates?
The City needs to complete a study of the cost to produce recycled water. Once that study is complete, we will adjust those rates. Recycled water is processed at the Water Reclamation Facility from reclaimed wastewater.